Employer life insurance is usually not enough

Group life insurance is a common workplace benefit. Since it is usually free, there is no reason to turn it down. But before you decide that's all you need, you should understand what you are actually getting.

It's important not to count on group life as your main source of life insurance, says Belinda Hutchinson, CLU, Financial Services Represen-tative at ColinaImperial Insurance Company. Most group life policies, whether you pay for them or not, don't offer enough coverage for your beneficiaries.

In many instances, the amount of coverage the company gives is based on your salary, says Hutchinson. That percentage is normally one, one and half or two times your annual earnings. This level of coverage, however, would fail to provide complete financial protection if the key breadwinner in a family dies.

If for instance your annual salary is $30,000, your employer life insurance coverage would only be $45,000 (based on 1.5 percent). This amount is not nearly enough, she says.

Insurance professional's general rule of thumb used is based on the idea that a typical family (defined as a husband, wife and no more than three children) will require approximately 70 percent of an insured individual's salary for seven years before they adjust to the financial loss of income. Accordingly, multiply the insured individual's current gross salary by seven and then take this result by .70 (70 percent) to arrive at the estimated need.

Although the calculation may seem complicated it is pretty basic. For example: $50,000 current salary x 7 = $350,000 x .70 = $245,000 estimated insurance need.

The family may need more insurance if there are more than three children, above average family debt, or if any member of the family suffers from poor health. Converse-ly, if the family has two or fewer children, the insurance need may be less.


Think "supplement"


"Perhaps the biggest drawback to group life is when you leave your job, you'll probably lose the coverage. Worse, when you leave your job, you might have trouble buying life insurance elsewhere if you've developed a severe health problem," Hutchinson continues.

You may decide that the insurance coverage you have through your employer is adequate by itself. But you should keep in mind that this coverage may not be permanent. When you are no longer employed, you are no longer covered through the group plan. So you need to consider what your total insurance needs are and then you can decide whether you need personal life insurance, group life insurance, or both.

Build your financial plan around personal life insurance that you buy on your own and can control. Then your group coverage can be used to add to your personal coverage and help meet your total insurance needs. You should review your plans regularly and consider your current needs in light of job changes or other things that affect your group coverage.


What is the best supplemental alternative?


There are two basic types of life insurance: term life insurance, which provides life insurance coverage for a specified period of time (the term), and cash value (permanent) life insurance, which combines a death benefit with a cash value component. Cash value insurance offers lifetime protection, while term insurance may be the most affordable option if you're buying life insurance mainly for the financial protection it offers, and your need for life insurance is temporary (until your children leave the nest, for instance).


Remember...

If you've been putting off purchasing life insurance because you don't want to pay the premiums, you may be doing yourself a disservice in the long run. The younger you are when you purchase life insurance, the lower your premiums will be.

If you are considering supplemental life insurance or life coverage in general, compare quotes from several companies. And remember, any policy that you buy is only as good as the company that issues it. Find out what rating the company has received from major ratings services, such as A. M. Best or Standard & Poor's. These companies evaluate an insurer's financial condition and claims-paying ability. The company giving you a quote should provide you with this information.

Buying life insurance is an easy way to protect your family after you're gone. If you know what to look for, you can get great coverage at a price you can afford.

Comments and or questions are welcomed: info@cfal.com

Bankruptcy enrages activists

Bankruptcy enrages activists
Diocese is - once again - ignoring abuse victims, they say

By SHIRLEY RAGSDALE
REGISTER RELIGION EDITOR


October 12, 2006



About half a dozen activists who stood outside Sacred Heart Cathedral in Davenport were as harsh in their criticism of church officials as the cold rain that fell on them Wednesday.

The victims of priest abuse and their supporters blasted a decision to file for bankruptcy Tuesday as a response to lawsuits seeking monetary damages for those who say they were sexually abused as children by clergy.

"It seemed the wind was as cold and bitter as the heart of the diocese this morning," said D. Michl Uhde of Davenport.

They criticized Davenport Bishop William E. Franklin for refusing their request to meet with lay Catholics from the diocese's seven regions before filing bankruptcy. They also wanted the diocese to submit to an independent audit of assets before filing.

The members of Davenport-based Catholics for Spiritual Healing and Iowa Survivors Network of those Abused by Priests made a similar plea two years ago, just before the diocese negotiated a $9 million settlement with 37 men who made child sexual abuse claims against diocesan priests.

"We got no response from the bishop two years ago and he did not respond to us yesterday," said Ann Green of De Witt, the wife of an abuse survivor.

Uhde, who on Sept. 18 received a $1.5 million jury award against the diocese, accused the diocese of choosing to pay bankruptcy attorneys millions to avoid answering victims' questions or taking responsibility for the "past behavior of those responsible for the horrible crimes against children."

"The only ones to benefit from this behavior are their attorneys," Uhde said.

Rand Wonio, attorney for the diocese, was unavailable for comment Wednesday.

Uhde said that victims' attorneys proposed a settlement that would have covered payment to all existing claims and would have paid for a program to provide for the needs of future victims.

Craig Levien of Davenport, one of Uhde's attorneys, said the diocese did not respond to the offer.

The bankruptcy froze payment of Uhde's jury award and puts in limbo 15 pending claims by men alleging they were sexually abused by retired Sioux City Bishop Lawrence Soens.

Additional claims include seven against Monsignor Thomas Feeney, former Davenport vicar general, who died in 1982; two against the Rev. William Wiebler, who died this year; and one against Monsignor Carl Meinberg, former president of St. Ambrose University before becoming pastor at St. Mary's Catholic Church in Iowa City. He died in 1975.

Green is especially concerned about the deadline that is likely to be set by the diocese and the court requiring abuse victims to file claims or forego financial payment from diocesan assets.

"Those who work and live with survivors know that emotionally, victims come to terms with their abuse in their own time," Green said. "It cannot be forced. And it doesn't happen at the convenience of the bishop."

Al Burke of Le Claire, an abuse survivor who has not sued the diocese, said he is not confident that filing bankruptcy will be fair to abuse survivors. He also fears Catholics will blame survivors.

"People call me and ask me why I'm trying to ruin the church," Burke said. "I'm not trying to hurt the church. I'm part of the church. I go to Mass every Sunday and I'm comfortable there."

Bankruptcy protection feared for parent of east coast mainline

Bankruptcy protection feared for parent of east coast mainline

Dan Milmo, transport correspondent
Thursday October 12, 2006
The Guardian


Sea Containers, the owner of the GNER rail franchise, could file for bankruptcy protection in the US by next week as it braces itself for a default on a $115m (£62m) bond payment.
The struggling group must make the payment by Sunday and there is mounting speculation within the rail industry that the Bermuda-registered company will seek shelter from its creditors. With little chance of it being able to meet further bond payments over the next six years, US-listed Sea Containers could apply for Chapter 11 protection in order to complete a financial restructuring without the threat of corporate collapse hanging over its operations. If the group does miss the payment on Sunday as expected and does not safeguard itself against bankruptcy, it risks a creditor filing to put the business into liquidation immediately.

Corporate restructuring experts said putting Sea Containers into Chapter 11 will not force the company to relinquish the GNER London-to-Edinburgh service. Bob MacKenzie, chief executive of Sea Containers, has said he is determined to hold on to GNER, which would be a core asset in a slimmed-down parent company focused on containers and rail. GNER is in discussions with the Department for Transport over renegotiating the terms of the 10-year franchise, which guarantees the government £1.3bn in payments.
Having admitted that the franchise is unsustainable under the current financial terms, GNER is hoping that the government will set a precedent by renegotiating the premium payments. If the DfT stands by its refusal to alter the terms, GNER could keep the franchise going for another two years but it would have to hand back the east coast mainline service by 2008 as the payments become increasingly onerous over the term of the franchise, say industry observers.

Restructuring experts said the parent company could file for bankruptcy protection, while leaving most of its subsidiary companies including GNER free to continue operating. GNER is partly ring-fenced from the difficulties at Sea Containers because it has a $54m emergency overdraft and a $27.5m bond that it can draw on to make the quarterly payments to the government. It also has separate banking and credit facilities. Sea Containers and the DfT declined to comment.

Mr MacKenzie said in August that the company was under pressure to complete a restructuring before the bond payment falls due: "The anticipation that we will not be able to pay the senior notes due on October 15 2006 unless we have adequate working capital and can be sure of our ability to pay the other public notes maturing in subsequent years, puts a critical time pressure on the restructuring process."

According to the latest unaudited Sea Containers accounts, the company has $80m in free cash and debts of $610m.

Chapter 11 protects a company from its creditors and gives the business breathing space of up to 18 months to repair its balance sheet. Under Chapter 11 proceedings, a bankruptcy court judge has the power to approve, amend or throw out a company's recovery plan. Creditors can lobby the judge for changes to the plan and their approval is required for a company to exit Chapter 11 protection.

Save on taxes -- by cutting your heat bill

Save on taxes -- by cutting your heat bill

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A credit of up to $500 on your 2006 return may be just the thing to make more insulation, better windows or a new water heater worthwhile.

By Liz Pulliam Weston

If you pay attention to the news, you probably heard that Congress created new energy tax credits for hybrid vehicles and solar panels. What you might have missed is a series of smaller conservation credits that could help a lot more people trim their tax bills for a much smaller outlay.

A Toyota Prius, after all, will set you back more than $20,000, while solar systems can run $20,000 to $30,000 for an average-sized house.

Another layer of insulation, by contrast, could cost you less than $500 and reduce your heating costs as well as your tax bill. New windows, doors, heating and cooling systems and water heaters also may qualify for the credits.

Here are the basics that you need to know:Looking for a loan?
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The credits are for improvements made in 2006 and 2007.

The tax breaks are modest -- typically 10% or less of the upgrade's cost.

The maximum credit you can earn is $500 (that's total, not per year).
Obviously, these credits aren't enough by themselves to justify any home improvement projects. But if you were already planning some upgrades, the tax breaks could put additional money in your pocket.
"If this was something you were going to do anyway in the next, say, three to four years, you might want to accelerate (the project) to get it done before the end of 2007," said John Roth, federal tax analyst for tax research firm CCH Inc. "Otherwise I can't see spending the money unless it's going to significantly reduce your energy costs."

The tax-credit menu
Project Minimum energy efficiency Maximum credit Typical cost
Central air conditioning SEER of 15, EER or 12.5 $300 $3,000 to $6,000
Heat pumps Varies by type $300 $3,000 to $6,000
Furnaces and boilers AFUE of 95 $150 $1,000 to $4,000
Electric water heater EF of 2 $300 $500 to $600
Gas or oil water heater EF of 0.8 $300 $500 to $600
Insulation, doors, duct sealing Meets IECC standards $500 Varies
Windows, skylights Meets IECC standards $200 $150 to $400 plus installation

SEER = Seasonal Energy Efficiency Ratio; EER = Energy Efficiency Ratio; AFUE = Annual Fuel Utilization Efficiency; EF = Energy Factor; IECC = International Energy Conservation Code of 2000, plus amendments

Figuring out how much you'll save is no easy feat, however. It all depends on how much you pay for heating and cooling, how energy efficient your current systems are and whether you're planning to do the work yourself or pay for installation.

The odds of an improvement paying for itself go up if any of the following are true:


You pay a lot for energy. Energy costs are higher in the Northeast than in the Northwest, for example, and a big house will cost more than a compact one.

You plan to live in the house a long time. Even modest savings will add up over a decade or more.

The system you're replacing is more than 10 to 15 years old and ?BR>
You're paying hundreds of dollars a year for repairs.
It usually doesn't make sense to replace an old system that's working well, said Consumer Reports home expert Jim Nanni. While new heating and cooling systems may be more energy efficient, it will take years for that efficiency to offset their costs. But you might think about replacement if you're facing expensive repairs.

"If the cost of repair is 50% of the cost of a new unit," said Nanni, who manages the magazine's major appliance and home improvement group, "you probably should consider the new unit."

$15,000 in windows for a $200 credit?
Here's an example of how the payoff of one project can vary significantly.

Let's say you're thinking about adding more insulation to your house, since today's government standard is to have 12 inches of insulation and most houses have four inches or less.

Energy experts say many homes could trim their heating bills by up to 30% with proper insulation, which tends to cost 20 cents to 40 cents per square foot when you install it yourself. So if your winter heating bill is about $1,000 (about average these days) and the cost of adding another layer of insulation in a 1,500-square foot attic is $300, you'll make your money back the first year, even without the $30 tax credit.

If your house is already fairly well insulated, your heating costs are lower or you hire a contractor to do the work, your payback period might extend to several years.

New windows are another project that tends to have a long payback period, Nanni said, which is why Consumer Reports doesn't recommend changing windows merely for energy savings.

Besides, the upfront cost can be daunting if you need to replace more than a few panes.

"Around here, replacing all the windows in an average house will cost $10,000 to $15,000," said Roth, who lives in Chicago. "And the maximum credit for windows is $200."

On the other hand, new windows tend to be an aesthetic improvement that can add to the value of your house. (The latest Remodeling magazine "Cost vs. Value Index" pegs the payoff at about 85% if you sell within a year, but you'll need to take those figures with a grain of salt, as I explain in "Remodeling risks often outweigh returns.") If you're going from single- to double- or triple-glazed, you may notice a significant drop in noise as well. Those factors, combined with the eventual cost savings, might encourage you to go ahead.

Or not. You may decide to make do with what you've got, particularly if you don't plan to be in your house long enough for the improvements to pay off

No tax breaks, but still worth the small outlay
You can still save money on energy, though. Here are some fast fixes that don't qualify for tax breaks, but typically do pay for themselves within a year or less:


Compact fluorescent bulbs. Replace incandescent and halogen bulbs with these energy misers and cut your light bill immediately. Fluorescents use about a quarter of the electricity of regular bulbs.


Caulking and weather stripping. Many homes lose a lot of heat in ways that are easy to overlook, Nanni said, such as holes that allow pipes and wiring to travel between floors.


Programmable thermostats. These typically run $35 to $100 and allow you to automatically turn down the heat five to 10 degrees at night and while you're away. You'll save about 1% of your energy costs for each degree over an eight-hour period, according to energy conservation site EnergyMatch.com, so a five-degree drop at night could save you 5% on your energy bill while a 10-degree drop could save you 10%.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

Tax planning is a year-round game; start now

Tax planning is a year-round game; start now

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If you knew you could deduct more of your expenses and save more tax-free, you would, right? Well, for 2006, you can -- if you get started now. There are even a few things you can do now to reduce your 2005 taxes.

By Jeff Schnepper

Every year, Congress tinkers with the tax code. Every year, your life changes. That makes tax planning an all-year activity.

There are a few tax-saving moves you can make until April 15 that will affect your 2005 taxes The rest of your moves must be made by Dec. 31 to benefit you for 2006.

So, this brings us to my most profound advice for 2006: An aggressive tax planning strategy may be to accelerate income into the shelter of lower rates this year, especially if you can take refuge under the special 5%-to-15% rates on dividends and long-term capital gains. Here what to think about.

Use those larger retirement deferrals
A wise man once told me that if I lived below my means, someday I be a wealthy man. It was good advice.

Put some more money aside for retirement. Extensive changes were made to the rules relating to IRAs and qualified pension plans by the 2001 tax law. Looking for a loan?
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For 2005, you still have until April 17 to make contributions that may qualify for tax breaks on your 2005 taxes. These deadlines apply to contributions to individual retirement accounts, SEP-IRAs and Keogh accounts. If you didn't establish a Keogh by Dec. 31, 2005, however, you won't be able to deduct any contributions made between now and April 17 until you file your 2006 return next year. Check with a tax pro to be sure.

Contribution limits rise again for 2005 and 2006. maximum 2005 contributions to defined contribution plans and 401(k) plans are both up $1,000 from 2004 and will rise again in 2006:

Changes in retirement plan contributions
Plan type 2005 2006

Defined contribution plans $42,000 $44,000.
Simple IRA plans $10,000 $10,000
401 (k) contributions $14,000 $15,000
IRA contributions $4,000 $4,000



Special additional contributions are now available if youe age 50 or older. Here's a rundown:


IRA accounts. You can contribute an additional $500 (for a total of $4,500 for 2005) into an IRA and $1,000 in 2006.


Section 401(k), 403 (b) annuities and Section 457 plans. These now allow for additional $4,000 contributions in 2005 and $5,000 in 2006.


SIMPLE plans. If you contribute to a SIMPLE plan, you get another $2,000 for 2005 and $2,500 in 2006 once you hit the half-century mark.
Contribution limits weren the only things changed. You can now borrow from your qualified plans if youe self-employed or an employee shareholder of an S corporation. Now only loans from IRAs are prohibited.

But, consider this: Distributions from such plans will always be taxed at your highest marginal ordinary rate. Depending on your assumptions, rate of growth and age, it may be better to invest for growth outside your retirement plans.

With all of these retirement changes, youe going to need some good direction. The good news is that your employer can provide you with retirement planning advice on a tax-free basis. The bad news is that this doesn cover tax preparation, accounting, legal or brokerage services.

Students and parents: Use your education breaks
Students and their parents make out for 2005 and 2006.

If youe single and made less than $65,000 ($130,000 on a joint return) in 2005, you can get an above-the-line college tuition deduction of as much as $4,000 in 2005 for yourself or a dependent child. That unchanged from 2004 but up $1,000 from 2003. If you have a college-age child, watch this provision. It expires after 2005, and Congress has not yet renewed it for 2006.

If you meet the 2005 income qualifications, you can take the Hope or Lifetime Learning tax credits, which may be even more valuable tax breaks. (A warning: You can't claim the tuition deduction and either of these tax credits.) If you file single or head of household, the credits start phasing out if your adjusted gross income (AGI) is above $43,000 and disappear if you make more than $53,000. If youe married and file jointly, the credit is phased out for incomes from $87,000 to $107,000.


Get more information on the Hope and Lifetime Learning credits here and here.

If youe graduated from college, your employer can give you as much as $5,200 per year in tax-free graduate school assistance.

The old IRA for education, now known as the Coverdell Education Account, allows tax-free withdrawals for use in grades K-12 to pay for tutoring, computer equipment, room, board, uniforms, tuition and extended-day programs. The annual contribution limit is $2,000 per child in 2005 and 2006.

Distributions from Section 529 accounts for college expenses are currently tax-free. In the past, they were taxed at the child rate.

The Section 529 contribution limits also were raised recently. Under prior law, there was a special five-year gift tax election, which allowed you to contribute as much as $50,000 per child. In effect, you were accelerating five $10,000 per-year exclusions into a single year.

Since the annual gift tax exclusion has increased to $11,000, you can now contribute as much as $55,000 per child in a single year.

Whew! Teachers get to keep a nice break
Our Congress just loves learning; 2005, like 2004, has plenty of benefits for kids and education.

If youe a teacher, you get one special benefit. You can deduct as much as $250 of your classroom expenses from 2005 without itemization or reduction.

This applies if you are a teacher, instructor, counselor, principal or aide and worked in kindergarten or through grade 12.

This nice little tax break was supposed to die in 2004, but Congress reinstated the provision to apply to both 2004 and 2005. So, enjoy. And hope the break is renewed for 2006.

Enjoy the lower rates
Nobody has started to tinker with tax rates yet this year. Enjoy them. Our tax rates are the lowest I can remember -- and Ie been around for a while. Compare our 2005 rates to those only four years ago.

Tax rate changes between 2001 and 2005
2005 2001 % change from
2001 to 2005
10% 10% 0.00%
15% 15% 0.00%
25% 27.5% -9.09%
28% 30.5% -8.20%
33% 36% -8.33%
35% 39.1% -10.49%


In addition, amounts in each bracket are automatically increased for inflation. The combination of larger brackets and lower marginal rates -- especially for upper-income taxpayers -- has put more dollars in your pocket in the last few years and will continue to do so.

The practical effect of the change is this: If you and your spouse file jointly and had taxable income of $80,000 in 2001 and expect the same in 2005, your federal income tax bill drops from $16,350 to $13,330 -- a savings of $3,020.

If your taxable income is $150,000, the tax bill falls from $36,822.50 to $31,731.50, a savings of $5,091.

And that starting with taxable income. When you add in all the new deductions and expanded credits, there should be a lot more money in our pockets after tax than three years ago.

Let put that in perspective. In early 2004, a Congressional Budget Office study showed the typical American household had a smaller income tax burden in 2001 than in any other year back to 1979. 2001 is now our high tax year!

Enjoy it while you can. Does anyone believe the rates won be moving higher? Congress and the White House seem to be intent on proving that the ig bang?theory really works. The cash to pay for increased defense and other spending has to come from somewhere.

Some tax-planning moves for 2006
Defer income if you can. Let say we don expect tax rates to rise in 2006. The betting is they'll at least stay constant for a while. If you don't have to take the income in calendar 2005, defer it into 2006. That way, the income is off your 2005 tax return. Postpone the pain.

Use the tax laws to minimize any stock market pain. Yes, the market up, but, as the past few weeks have shown, it is still volatile. So, you may have some investments that have generated deductible losses while others have (hopefully) major gains. You can use your losses to offset any gains. On a net basis, all capital losses, regardless of whether theye short or long term, offset capital gains on a dollar-for-dollar basis. You can use $3,000 of net capital losses in excess of capital gains to offset ordinary income. Any excess left over can be carried forward to 2006.

But watch out for the wash-sale rules. The IRS disallows losses on securities sold if substantially identical securities are bought within 30 days before or after the loss sale. Best case: Buy 31 days later.

Bunch your medical expenses if you can. Only medical expenses in excess of 7.5% of your adjusted gross income are allowed as deductions. So, if your adjusted gross income is $100,000, you get no deduction for the first $7,500 of your medical expenses. But there are some medical expenses you can defer or accelerate, depending on whether you expect to exceed this floor. Elective surgery, orthodontia or the payment of your medical insurance premiums can all be advanced or postponed to meet your minimum floor.

Miscellaneous itemized deductions. These are only allowed to the extent they exceed 2% of your adjusted gross income. If youe going to exceed the 2% floor, then accelerate your deductions. Prepay your accountant in 2006 to do the tax return that you don have to file until April 2007. Renew and pay for your investment publications before the end of the year. If you don have the cash, charge these expenses. The charges are allowed in the year of the charge, not when you actually pay your credit card bill.

Accelerate payments that can produce tax deductions. If you write your January 2007 mortgage check or the check for your property taxes on or before Dec. 31 2006, you can claim the interest deduction or real estate tax deduction in 2006.

Get the most out of non-cash charitable contributions. Give your old clothes, furniture, equipment, etc. to your church, synagogue, Salvation Army or Goodwill before Jan. 1, 2007 and take a deduction for the fair market value. Make sure you get a receipt: No receipt means no deduction.

Plan your tax payments. An MSN Money survey on taxes found that more than 53% of the respondents expected a refund of more than $1,000. That a whole lot of money left interest-free with the IRS.

You want a big refund? Send me your money. I be happy to send it back to you, interest-free, prior to April 15.

Otherwise, shoot for the safe harbors -- 90% of the current year total tax or 100% of your prior year total tax (110% if you prior year adjusted gross income was more than $150,000). Hit those targets and, no matter how much you owe next April 15, there won be any interest or penalties if you timely pay the balance.

Adjust your withholdings to meet these targets. If you expect to pay next year, put the withholding difference in a money market account. At least then, youl be picking up any interest.

Plan for the alternative minimum tax
This awfully mean tax has been destroying my clients?refunds this year. What can be done?

If you expect to be hit by the AMT, reverse many of your typical planning strategies. Defer, rather than accelerate, those items that aren allowed as deductions for the AMT. Such expenses include taxes, employee business expenses, investment expenses, job search expenses, etc.

The AMT is a flat 26%/28% tax. If youe normally in a higher bracket than that, accelerate your income. Such income will then be subject to the lower AMT rates. For more on this, see "Don't get bitten by this Awfully Mean Tax."

Meanwhile, the U.S. tax law is going to change. Congress is considering a Value Added Tax (VAT) or even a consumption tax. Plan your tax year under current rules. But keep on eye out and watch here for updates. The law will change. And, when it does, MSN Money will be here to guide you through the new rules.

Get next year's tax refund now

Get next year's tax refund now
The lowly W-4 form you sign when you take a job can be a powerful tax-planning tool that can put cash in your wallet now. Here’s how to make work it for you.

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By Jeff Schnepper
How'd you like to put more money into your pocket now? If you're an employee, it's really easy.

When you started working, your employer asked you to complete a Form W-4 -- the Employee's Withholding Allowance Certificate. From your answers on the form, your employer determines how much to withhold in federal and state taxes.

I admit that the phrasing is arcane: The form asks how many "withholding allowances" you want to claim.

But here is the bottom line. Withholding allowances equal cash. The more "allowances" you claim, the less taxes are taken from your paycheck. And that means more cash comes to you each pay period.

Signing the W-4 the first time doesn't lock you into one set of allowances forever. In fact, federal law requires your employer to let you change your allowances at any time. Again, increase your allowances, and you increase the amount of money you take home now. Here's how:

The family. You get an allowance for each exemption you claim on your tax return -- for yourself, your spouse and your dependents. Unfortunately, that's where most people stop, and they over-withhold.

Tax credits. You can get additional withholding allowances for the estimated tax credits you expect to take. If you expect to qualify for the earned income credit, the credit for child and dependent-care expenses, the foreign tax credit, the child tax credit, education credits or adoption credits, these all permit you to claim additional allowances
Business expenses. You can get additional withholding allowances for employee business expenses, moving expenses and, if you qualify, for the additional standard deduction for the aged or blind.

Estimated business losses. You can get additional withholding allowances for estimated net losses from your business or profession, from capital losses, from losses on rental properties and from losses from farming expenses
IRA contributions. You can get additional withholding allowances for potential contributions to a deductible IRA.

Itemized deductions and alimony. You can get additional withholding allowances if you expect to itemize your deductions and/or pay alimony during the year.

Itemized deductions give you possibly the biggest opportunity to put a lot more into your take-home pay. The key is expected, not actual, deductions, contributions and losses. Additional withholding allowances can always be claimed under the expectation of making charitable contributions, incurring higher medical expenses or borrowing money and incurring an increase in interest expenses.

Why reduce your withholdings?
The advantages of reducing your withholdings can be significant. If you're single and earn $20,000 a year, one additional allowance that you claim reduces the withholding taken from your salary by about $40 a month. That adds up to $468 a year. With five additional withholding allowances, you have an additional $2,300 every year in your pocket.

Understand that reducing your withholdings does NOT reduce the tax you have to pay on April 15. (Or more correctly for the 2006 tax return you will file in 2007 -- April 17.) What it does do is put more money in your pocket now, rather than later in the form of a big refund.

Psychologically, it's great to get the big refund after you file your return. But think about it: a big refund means that you've given an interest-free loan to the IRS. They, not you, have had the use of your money during the year.

The objective you should focus on: Give the IRS just enough money so that you avoid any penalties. That way you have the use of the money during the year -- and any interest earned on those "extra" dollars belongs to you.

You can avoid any under-withholding interest or penalties in 2005 if you meet any of the following safe harbors:

Your net tax due is less than $1,000, or

You've paid in at least 90% of your total tax due for the year, or

If your prior year's adjusted gross income wasn't more than $150,000, and you paid in at least 100% of your prior year's total tax, or

If your 2005 adjusted gross income was more than $150,000, then for 2006, you must pay in at least 110% of your 2005 income tax bill. If, for example, your adjusted gross income exceeded $150,000 in 2005 and your TOTAL 2005 tax was $20,000, you can avoid any interest or penalties for 2006 if you pay in at least $22,000 -- 110% of the $20,000.

No matter how much you may owe on April 15, if you meet any of these safe-harbor requirements, you escape all under-withholding interest and penalties.

In the worst-case situation, you can take the "extra" dollars and put them in a money-market fund each pay period. This cash will be there on April 15 if taxes are due, and at least you've earned some incremental dollars in interest.

Don't forget: you may file a new W-4 form at any time if you want to change your withholding allowances, for any reason. This gives you another opportunity for tax savings.

Unlike estimated tax payments, which are always due on specified dates (April 15, July 15 and Oct. 15, and Jan. 15 of the year following), payroll withholdings are expected to be paid evenly throughout the year. Some sophisticated, tax-knowledgeable individuals significantly under-withhold on their income for the first 11 months of the year, file an amended W-4 and then significantly over-withhold in the last month to make up the difference.

As long as you meet any of the safe harbor rules we discussed, you escape interest and penalties for under-withholding.

So take a look at your W-4. I'll bet you'll be glad you did.

It's not just high taxes

It's not just high taxes...
...it's the quality of services, too
October 12, 2006


If Eliot Spitzer and John Faso were really listening to Long Islanders on their visits this week, the gubernatorial candidates would have learned that voters have more on their minds than just high taxes. They also care a lot about the quality of the services that the tax levies buy.

Whether the comments came at a Central Islip home, which Spitzer visited with Sen. Hillary Clinton (D-N.Y.), or at Briarcliff College, where Faso held a town meeting, the tension between cutting and spending was clear.

A recent college graduate, living in his parents' basement, wanted help with the cost of housing so he can stay on Long Island. A middle-aged woman wanted help with nursing care for her mother. A student and a couple with teenage kids wanted help with college costs. And so it went.

Spitzer, Faso and Clinton all talked about the need to reduce unfunded mandates and fix school-aid formulas and, yes, to cut property taxes. And that's a good thing. They also showed that they care about suburban issues. That was a legitimate concern of Long Islanders, with Attorney General Spitzer a New York City resident, Faso an upstater and Clinton often tied to Washington - and with the statewide races apparently so uncompetitive that candidates might feel they don't need to focus on much beyond appealing to their political bases.

But Long Island isn't a one-issue region. And while folks here are straining under one of the nation's highest tax burdens, they appear willing to pay a high price if they get a high return - and an honest one. They are willing to invest in schools, roads and open space if their leaders make a compelling case and manage the state's resources well.

New York Life Introduces New Life Insurance Product with Instant Legacy Feature

New York Life Introduces New Life Insurance Product with Instant Legacy Feature
Single Premium Policy Features a Money Back Guarantee, Simplified Medical Questionnaire and Death Benefit Guarantee

NEW YORK--(BUSINESS WIRE)--New York Life Insurance and Annuity Corporation1 today announced the introduction of NYLIAC Instant LegacySM, a single premium universal life insurance policy which gives customers the flexibility to easily convert and transfer their “rainy day” assets, from various savings, money market accounts and Certificates of Deposit2, into a life insurance policy that leverages these funds in the form of a death benefit easily passed on to their heirs.

“With NYLIAC Instant Legacy, one premium payment guarantees a death benefit providing consumers with the security that they are able to leave a legacy, with a money back guarantee providing the assurance that they can always access at least the full amount they paid should they decide to end the policy,” said Scott Berlin, senior vice president, New York Life. “With the added benefit of simplified underwriting, this insurance policy can effectively reposition money to provide peace of mind to policyholders.”

The NYLIAC Instant Legacy policy offers a wealth of benefits, including:

A money back guarantee3, where individuals can choose to have their initial single payment returned in full at any time;
A guaranteed death benefit4, generally free from federal income tax;
Simplified underwriting with a one-page questionnaire; no medical exams; and
Access to cash value with 10% surrender charge-free withdrawals5.
Instant Legacy is designed as a single premium life policy for those with a life insurance need, wishing to build legacy assets. With a $10,000 minimum premium, the single premium paid purchases a death benefit that is guaranteed to age 100. Clients have the ability to take out loans at any time against the policy where they may borrow up to a maximum of 90% of the Cash Surrender Value.6 Surrender charge-free withdrawals can be taken after the first year, and partial withdrawals may be taken at any time.

In addition, the policy also features two benefits that are automatically included within the policy. The Accelerated Death Benefit for Terminal Illness allows early access to the policy’s death benefit due to a terminal illness and the Spouse’s Paid-Up Insurance Purchase Option allows a spouse to purchase a single premium paid-up whole life policy without showing evidence of insurability upon death of the insured.7

New York Life and New York Life Insurance and Annuity Corporation (NYLIAC) continue to be among the highest rated institutions by each of the four major independent rating agencies for financial strength: A.M. Best (A++), Fitch (AAA), Moody’s Investor Services (Aaa) and Standard & Poor’s (AA+). Source: Individual Third Party Ratings Reports (as of July 18, 2006).

New York Life Insurance Company, a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States and one of the largest life insurers in the world. Headquartered in New York City, New York Life’s family of companies offers life insurance, annuities and long-term care insurance. New York Life Investment Management LLC provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds.

Please visit New York Life’s Web site at www.newyorklife.com for more information.

(1) New York Life Insurance and Annuity Corporation (A Delaware
Corporation) is a wholly owned subsidiary of New York Life
Insurance Company.
(2) NYLIAC Instant Legacy is not a banking product, and is not FDIC
insured. It is a life insurance contract that is backed by the
claims-paying ability of the issuer.
(3) You may request that the cash surrender value of this policy be
paid to you, ending the policy. As stated in the policy, the cash
surrender value will never be less than the premium paid into the
policy, less any partial surrenders and outstanding loans,
including loan interest.
(4) Loans and partial withdrawals, including loan interest, will
reduce the guaranteed death benefit.
(5) In years 2 through 8, you can access up to 10% of the policy's
cash value each year without incurring a surrender charge. The
policy's cash value is one of three values compared to determine
the policy's cash surrender value. Partial withdrawals will reduce
the cash surrender value and death benefit.
(6) A maximum of 10% of the Cash Surrender Value is available in some
states. Loans and partial withdrawals, including loan interest,
will reduce the cash surrender value and death benefit, and may be
taxable and may carry a 10% IRS tax penalty if the policy is a
modified endowment contract and the policyholder is not yet age
59 1/2.
(7) Automatically included only in those states that allow the Spouse
Paid-Up Insurance Purchase Option.

Structured Settlement Industry Submits Comments on Proposed Rule

Structured Settlement Industry Submits Comments on Proposed Rule On Pennsylvania Structured Settlement Protection Act

In February 2000, Pennsylvania enacted structured settlement protection legislation governing sales by injury victims of rights to receive future payments under structured settlements. Like the corresponding statutes that have been enacted in 45 other States, the Pennsylvania Structured Settlement Protection Act (“SSPA”) requires that any proposed transfer of payment rights under a structured settlement receive advance court approval based on a finding that an express finding that the transfer will be in the best interest of the injury victim and his or her dependents.

Earlier this summer the Civil Procedural Rules Committee of the Pennsylvania Supreme Court published for comment a proposed new rule designed to give Pennsylvania courts additional information to assist them in determining whether proposed transfers will, or will not, pass the “best interest” test.

Through its general counsel, NSSTA has submitted detailed comments on the proposed Rule. To access the NSSTA submission, please click here.

Proposed new Pennsylvania Rule 229.2 would specify many of the contents of any petition for approval of a transfer of payment rights under the Pennsylvania SSPA, including an affidavit of the payee (i.e., the injury victim) containing detailed information about the payee’s financial status.

The Insurance Federation of Pennsylvania has filed comments addressing some of the same issues and endorsing NSSTA’s comments. To access the Insurance Federation’s comments, please click here.

Recognized by Congress since 1982, structured settlements provide long-term financial security to injury victims and their families through a stream of payments tailored to their needs.

The National Structured Settlements Trade Association is an organization of more than 600 licensed insurance brokers, insurance companies and other members who are involved in establishing structured settlements to resolve personal injury and workers' compensation claims.

Car insurance hurts? Study suggests why

Car insurance hurts? Study suggests why
Oct. 12, 2006. 09:06 AM
JAMES DAW


The outcry over the cost of auto insurance in Ontario has subsided after a 14 per cent reduction in average premiums since 2003. But a study suggests we and other Canadians carry a relatively heavy burden.

Canadians must buy more insurance protection than American and British motorists, and insurers face more regulation. The result, according to a researcher with the Vancouver-based Fraser Institute, is less freedom of choice, less fairness and less affordable insurance.

Brett Skinner has constructed his own market-quality index using 15 points of comparison to rank the 10 Canadian provinces, 50 American states and the whole of the United Kingdom. He concludes Manitoba, Saskatchewan and British Columbia are the worst markets by his unique measure, and Ontario comes next.

Only Alberta ranks higher than two American states, namely Kentucky and North Dakota The United Kingdom ranks in the middle.

"The data show the public monopoly or government-run auto insurance systems consistently produce the worst outcomes (in terms of choice, affordability and sustainable pricing) for consumers," Skinner writes in his research paper, posted yesterday at the Fraser Institute's website.

Skinner, a Ph.D. candidate in political science and public policy at the University of Western Ontario in London, upholds the usual Fraser Institute bias in favour of private enterprise and unfettered markets.

"The goals of the study are to provide insights into the links between regulation of auto insurance markets and its outcome for consumers, and to help identify public policies that are most likely to produce superior results over all," he writes.

During an interview, he warned the newly elected Liberal government in New Brunswick to reconsider its threat to bring in public auto insurance if private insurers fail to cut premiums.

Skinner has not attempted to compare premiums at the level of the individual motorist. Nor has he attempted to do a value-for-dollar comparison. In his eyes, it's a negative factor that Canadian provinces require vehicle owners to carry two to 10 times more coverage for liability for bodily injury than U.S. states, and proportionally even more no-fault medical and income accident benefits.

To gauge the relative insurance costs, Skinner merely ranks states and provinces by the percentage of gross domestic product spent on premiums for private autos in 2002. By this measure, U.K. residents spent the least, Ontario about the average and British Columbia the second highest. Skinner does not adjust for the number of private vehicles in use, or driving conditions.

To measure affordability, he divides premiums by total personal disposable income for both the insured and uninsured. His argument is that insurance will feel more expensive to residents who have less income to spend after taxes.

Skinner concluded British Columbia had the least affordable coverage in 2002, followed by New Brunswick, Saskatchewan, Manitoba, West Virginia and Ontario. Ontario's affordability ranking would have changed since then. The average premium per vehicle of $1,280 at the end of August was close to 2002 levels, while personal disposable income will have risen.

Skinner also ranked jurisdictions by their insured losses as a percentage of premiums to see whether the premium levels were sustainable.

He also compared restrictions on private competition and the right to sue, the approval process for premium adjustments, minimum financial strength and premium taxes.

Mark Yakabuski, Ontario vice-president of the Insurance Bureau of Canada, said Skinner got industry data but no guidance from bureau staff.

"The report is instructive, but it is not necessarily where we want to go in Ontario," he said. "(Skinner is) certainly highlighting freedom of choice issues, but without giving the same kind of information about the cost of these choices."

If drivers were not insured to the levels now required in Canada, the cost of personal injury and loss of income due to disability would be borne somewhere else.

But Skinner argues that forcing consumers to buy minimum levels of coverage, and restricting the degree to which insurers may set premiums to reflect the driver's risk profile, can also produce unintended social consequences.

His study may add to the debate over the right mix of public policies, but will not put an end to it.


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James Daw, CFP, appears Tuesday, Thursday and Saturday. He can be reached at Business, 1 Yonge St., Toronto M5E 1E6; or 416-945-8633 or at jdaw@thestar.ca by email.